Just about every residence and almost all commercial establishments require a supply of hot water. The hot water is used for domestic or other purposes, the energy costs for which may comprise a large portion of the total energy bill. Electric water heaters are quite commonly used although natural or liquified gas, or other fuels, may be cheaper to use over the life of the water heater.
Electric water heaters, by definition, are used in all-electric homes. Many houses, when originally constructed, were outside the reach of existing natural gas distribution facilities. With the popularity of electric heat pumps for space heating in many parts of the country, all electric houses are common even where gas distribution facilities may now be available.
Electric water heaters are also especially common in mobile homes where the increased cost of venting the exhaust gasses from the interior of a mobile home encourages manufacturers to use initially cheaper electric water heaters. Thus, the purchase price of the mobile home may be lower; however, this initial savings may be quickly lost through the use of expensive electricity for heating water. In many areas, the heat obtained by electricity may be twice as costly as heat produced by gas. Gas also allows a much more rapid recovery, that is, gas combustion may transfer up to 60,000 BTU to the water in the same time that an electric heater would transfer only 15,000-20,000 BTU.
Regional gas companies, having a substantial investment in their gas distribution system, frequently have a huge demand from consumers in the winter for space heating, yet have a relatively small demand in the non-winter months. The return on the investment for the gas distribution system could be significantly increased if a more consistent gas demand existed year round. Since water heating typically may consume up to one third of the energy consumed in a home, gas suppliers have a strong incentive to convert electrical water heaters to operate from gas. The increased demand for gas would then be far less sensitive to seasonal demand and would allow the gas companies to operate their distribution systems at a greater efficiency.
The replacement of an existing electric water heater with a conventional gas water heater may raise legitimate safety concerns. For example, many individuals are reluctant to have a gas appliance within the home because of a perceived risk of a gas leak and a subsequent explosion. In addition, "tighter" energy efficient homes have a relatively low rate of air exchange. The combustion of gas within a home may lead to the accumulation of undesired and hazardous gasses within the tighter energy efficient homes. While a conventional gas water heater is typically vented to the outside, this venting requires that the heater be positioned near an exterior wall of the home or building. In many homes, a location near the exterior of the building may not be available. Accordingly, a simple substitution of a gas water heater for an electric water heater is often not practical or desirable.